The student-loan-debt crisis is massive. Americans owe more than $1 trillion in student loans, and according to a July report by the Consumer Financial Protection Bureau, $150 billion of these student loans are from private lenders, which means they often come with higher interest rates than federal loans and are almost impossible to shed in bankruptcy proceedings.

Nightmare stories about young adults struggling under mountains of student-loan debt appear in the media nearly every day. But how many college students are using their loans only for necessities? How many are taking out more money than they need and blowing it on silly stuff that they’ll be paying off for years or even decades to come?

I conducted some informal research to determine how endemic the misuse of loans really is. I tapped my kids as well as other recent college graduates, friends and co-workers, and I was stunned at how pervasive this seems. When I asked my stepson, who graduated last winter, if he knew of kids using their student loans for non-school-related purchases, his response was, “Don’t even get me started.”

First, he told me about a family friend who, a few months ago when she was a junior in college, used her student-loan money to buy a used car. I almost flipped. Didn’t she realize this means she’ll be paying that car off — at an interest rate almost twice as high as a typical auto loan — long after it breaks down?

My colleague Meghan, also a recent grad, mentioned classmates who had purchased flat-screen TVs, sound systems and trendy decor for their dorm rooms. I heard from various people about kids using student loans to pay for expensive spring-break trips, clothes and, a common refrain, “partying.” These students will be paying high interest rates for purchases they probably won’t even remember in five years.

So listen up, parents: this fall, as funds from student loans make their way into college students’ bank accounts, it is critical that your child understands how loans work. For many young adults, cash just seems like cash — regardless of how they got it. But not all money is created equal, and not all loans are equal either. For example, if our family friend had taken out an auto loan to fund her used car, she likely would have paid interest closer to 3.5% than the 6.8% on the federal government’s direct unsubsidized loans, which are available to undergraduates and grad students and don’t require them to demonstrate financial need. Going the auto-loan route would have meant the length of the loan would have been more appropriate too.

Using student loans like a credit card can be very costly to young adults — and to the parents who co-sign these loans. In many cases, interest on private loans starts accruing even while the student is still in school. Repayment periods for these loans can extend for long periods — sometimes 20 to 30 years following graduation — which may make the monthly repayments seem less onerous on the surface, but the interest can really rack up over time. Having a conversation now with your child is important before he or she unintentionally creates a financial mess down the road.

As parents, we have to accept that our kids will make mistakes — it’s our job to help mitigate them. Work closely with your child to ensure that he or she is borrowing only what’s needed and talk regularly about how the funds are being used. And to help minimize debt, tell your kid to follow this sage advice from FinAid.org: “Live like a student while you are in school so you don’t have to live like a student after you graduate.”

This is bullshit. Your "informal research" is poor journalism. How and WHY did your editor allow this to pass. Student loan checks are NOT disbursed to the student -they are disbursed to the school directly. They students MAY be issued an overage check, which is usually used to help with rent and bills (although it is rarely enough.) It's conceivable that a student might use this to purchase beer, but they wouldn't get a lot of it. I think my overage check was less than $5,000 for the school year.

You are unprofessional. This article is misguided at best. You should've done some formal research.

I think it could have something to do with the declining employment rate amongst teenagers. In 2005, 54% of teenagers worked a summer job, which at the time was a record low. In 2011, only 25% of teenagers had a summer job. If you don't work, you don't really understand the value of a dollar or the power of the government to take away large chunks of your hard-earned money. After working several jobs as a teenager, I became very frugal and developed a healthy fear of legally binding contracts.

Really? When I was in college, there were lots of work-study jobs, as well as on-campus employment. I'm sure illegal immigrants are taking jobs away from teenagers in the construction, farming, and food service sectors, which is obviously something we need to fix; however, I do think teenagers who really want a job can still find a niche if they're willing to put in the effort. I hired a teenager for childcare, and I would hire one for tutoring and lawn care if they advertised.

Prior to the 1990s, many teenagers worked in the construction and farming industries over the summer to earn money for college. There's nothing racist or xenophobic about acknowledging the fact that these jobs are now occupied by illegal immigrants. I'm not going to call them "undocumented workers" because the simple fact is that they are in the United States illegally, and they have taken jobs away from citizens, namely the teenaged citizens whom you so passionately defend.

When you use the phrase "enough to live on" I'm concerned that we're not talking about the same thing. Teenagers are not self-supporting. They're dependent upon their parents for medical insurance, college tuition, and room and board. Teenagers should work to learn responsibility, frugality, and other skills that will serve them well in life, but they shouldn't be on the streets fending for themselves like Oliver Twist.

Unskilled labor in this country is entitled to the minimum wage, which is $7.25 per hour. I pay my domestic employees $10-40 per hour, depending on what they're doing. Teenagers generally don't earn enough income to owe taxes, unless they're working full-time.

Unpaid internships have always existed, particularly in law and government, and I agree with you that those should be abolished. No one should work for nothing. However, there are many jobs which do pay twice the minimum wage. My advice is to cultivate a skill such as typing, which is how I earned money in college.

Please take the time to educate yourself. You have many opinions but very little knowledge.

What teenagers and especially what college students have you known that work in construction and farming to help make ends meet?I'm going to ignore your patently xenophobic comment about immigration.

How much do you pay that teenager for childcare? Enough to live on? I doubt it. Probably not even enough to actually have to pay the dreaded taxes you're discussing.

And you've ignored my comment about unpaid internships, which are the new "entry levels" for many forms of employment today and basically are indentured servitude, not even for money but for the mirage of a job at the end of it.

Students are taking out greater loans to live on because that's what they have to do.

But thanks for blaming every powerless person in the economy today. That's a real treat to hear.

I've never even heard of this. Student loans are like, just for tuition. Work-study money can be used for anything but it isnt a loan, and that, usually along with another off campus job, is what pays for food, housing, and books. This isn't an issue about student loan funds being misused, its about them being distributed in a confusing manor so they seem like ordinary cash

As a parent of a college student and faculty at a major state university in a college town, I agree with the article. Many students are cautious with their money, but many more are not. Our town is filled with new apartments with granite counters, wood floors, and lazy rivers. These are advertised specifically for students. It is a strong tempation for students compared to saving a few hundred dollars a month and living in an old place. The expectation now is to live well, not to just get by. It is an extension of the easy credit. And many of the students drive much nicer cars than I do.

It's a sad thing to hear that instead of helping a student financially, student loan is now creating a huge problem to the community and a lot of people are really having a hard time paying that loan amount. But since the borrower have agreed on the loan terms, I personally think that they should take full responsibility of paying it. - http://lizloans.com

I watched as my daughters friends blew their money on frivolous items such as clothing, trips and partying. The trouble as I saw it is these kids had never had a lump sum of money before and did not realize how quickly it could be "accidentally spent". I think the realization of how fast it goes comes as a shock - just as it did to me when I was that age. Plus there are so many "service" expenses with the internet, cable and cell phones just to name a few. These expenses don't have anything to show for. I worked with my daughter to deposit any lump sums of money she received in loans, scholarships, etc into a savings account and together we worked out a monthly amount she could have to pay for her education and expenses. No exceptions. Ever. This money automatically deposited into her checking account. At times it created hostility because she knew the money was there, but I told her I would not bail her out if she did not honor our agreement. End result, she graduated within her means and even had money left over to make a loan prepayment, much to her surprise. Now that she is finished, she appreciates my efforts and realizes she really didn't need a lot of the things she thought she did. She had fun and didn't lack for much, just had to get more creative by sharing her wardrobe with room mates, meal planning, etc. Found part time jobs waitressing which provided tips in addition to a small paycheck. I am proud of her.

Your daughter was lucky to have a parent who cared enough to set boundaries, and she'll have a much better start in life as a result. I feel sorry for kids who dig themselves a hole so deep that they can never get out.

@Talendria i feel bad for her daughter to have such an overcontroling parent who over steps boundaries for her daughters age,

if it had been my parent you can bet sh*t wouldve hit the fan

pretty pathetic to take control of your 20-something yearl olds money and force them to work 2 jobs and go to school and borrow clothes from other people.

and wtf is a meal plan? lol, did she have to eat bread and water on certain days?

seriously this sort of charecter building by making things as exhausting and difficult for your kids as possible crap is rediculous, if youre a good parent this shouldve been done subtly and insidiously all along so by the time theyre legaly an adult you dont have to power grab and breed resentment and alienation

I would like to add, that by managing her money the way I did was actually considered "fraudulent", because she could not access it herself and legally it was hers to manage. But since everything she qualified for, outside of scholarships which she herself earned, was based on my income until she turned 23, I felt I had the right to do this as her parent. She would have been within her rights to go to the bank and protest, creating legal issues for me and freeing up her money. I was fortunate that she agreed to go along with it.

This may not happen at all universities, it may not happen with all students, but I have worked in financial aid for 14 years and I can say that at every single institution I have worked there are students that fit the description of this writer. No, I have yet to work for an Ivy League school, I have not worked at an institution where the majority of my students come from wealthy or upper middle class families, I have worked to help the underserved populations achieve their goals at state colleges and community colleges and even a law school. Here are my observations over the past 14 years, Students borrow more than they need. Students have a hard time determining what the difference is between a need and a want. A need is 4 walls and roof over your head, food, electricity to keep you warm and light to see at night. It does not have to be in the most expensive area of the city. You do not need to drive a BMW, Mercedez, or even a Mustang. If your car can get you from point A to point B your need is met. You do not have to have a Hollister t-shirt...Haynes will do just fine....name brands are for people who can afford them and as a student you can't. Going to spring break in Fla, Texas, California, Vegas, or out of the country...not a need(work during spring break to save money).

Common sayings heard from students on refund check day- I'm getting my hair and nails done I have money today! Let's go out to eat, I got my refund check. I just got my refund check I'm going to by those shoes I have been wanting.

When I worked for a law school I had student's ask for a budget increase so they could borrow more money(the budget was 50,000 and tuition was 25,000 for fall and spring). The reason- they were living in an apartment by themselves that cost 1200 a month and had just bought a BMW when they were still working. As I explained to all students during orientations and even open houses, You have to remember, you are a student. You have to live like you have no money at all because if you don't, you never will.

"You have to live like you have no money at all because if you don't, you never will." Great advice! I've often reflected that when I defer my desires for just a little while, I can buy something even better in the not-too-distant future. Scrimp now; splurge later.

Well, if I were a student that economized by going to a cheap in-state school, and I planned on getting the same debt amnesty that folks going to the expense private schools will be getting, I would want to maximize the amount that I could welch out on.

Odds are good that the student buying the used car in your example wouldn't qualify for a 3.5% rate. A few years ago when I was about a year out of school and had a good job the best I could qualify for was about 10%.

A few months before I graduated I bought a car for so that I could go to interviews, and commute to my new job. It was about $6000 at an interest rate of about 12%. I would have been better off to buy a clunker for $2000 with student loan funds, which were about 6%.

Let's see... the Federal Government just stopped subsidizing loans for graduate students, so my loans for the 2012-2013 school year are going to start compiling interest immediately (rather than after leaving school).

Oh, also add that the Feds doubled my interest rate from 3.4% to 6.8%.

So why exactly would I be taking out MORE student loans to "blow" on anything but tuition?

Not arguing with the main point of this article, but it IS a little naive. I'm currently in college, and I know NO other college students who qualify for a 3.5% interest rate for financing a car and without their parents they can't really prove that they have the income to qualify (some still can't even WITH their parents). Students typically have a huge amount of debt plus no steady/two-year work history given jobs are typically by semester. So who's going to finance them?

In the meantime I need to purchase a car to get groceries (no decent public transportation here, or I'd take it), get to my now off-campus internship (since I'll be graduating and they're tops in my field amp; likely to offer me a job), get to the nonprofit I helped found that runs out of a school on the other side of town and my refund check is readily available.

Yeah, this is a lot of blame to levy on students when it's not students' fault that most places that will hire students will not pay them money. See also: the ridiculous person above who seems to think that students should work in construction and farming to make ends meet. It's a nice little kiss-off to urban students.

Why did the writer come so close to a real investigation, only to leave it at anecdote and assumption? Why didn't she ask anyone who was actually spending loan money on frivolous things, and why didn't she then talk to those people's parents? Instead, all we got is, "Two friends told me they know tons of people who misuse loans."

Cigarette companies (and other drug dealers) love 14 year olds. Banks love 18 year olds. Both take advantage of immaturity and inexperience (18 year olds are adults, aren't they?) to hook them on a lifetime of turning over their money to their suppliers. The system is set up for this. Only one side benefits. Surprisingly, it's also the side that makes the rules of the game.

The main part of being a parent is to ensure the money is used wisely. You give them a debit card with a set limit on total purchases withing a certain time frame. You don't give them cash. You don't let them handle the loan at all - UNLESS they have already demonstrated to your satisfaction that they understand how to deal with and prioritize finances.

There's no sense letting them indenture themselves to the wealthy that early in life. It will come later, sure, but you as parents can do that much to give them a taste of financial freedom (such as it is) for that much longer.

Are you really suggesting these rules for 18 -23 year olds who usually live away from home? For one they HAVE to handle the loan -- it's in their name.

"Don't give them cash"? Really? For a 20 year old college sophomore do you really think they're going to go around cashless because mommy amp; daddy didn't GIVE them any? Limit how much they can spend on debit? How do you even have access to that if they have their own checking account from their own on campus job? These rules seem appropriate for a 16 year old ... not a college student. Even at 16 I had my own job amp; my own checking account/debit card.

Unfortunately this is exactly right. Fund outlays will vary, of course, by individual and certain loan/scholarship/work assistance programs are set-up to avoid this kind of abuse, but human behavior being what it is, once you place dollars in an account that can be used for any expense, they will be used for any expense. both legitimate and illegitimate. Spending cannot be controlled (and really, should not be controlled) by anyone other than the account holder.

Any of us who are teachers or administrators or even parents of college kids who say "I've never known of anyone who's spent loan money unwisely" is simply indicating how far out of touch they are with the reality of their students' lives.... Are there some who do not abuse their loans? Sure. They're the same ones who save money to pay for school...who work part-time during school...who typically do not carry massive amounts of debt...and who generally go about their lives in a sensible fashion. But there are a lot who don't.

And yes, this is not by any means a scientific survey....this is not statistically defensible... and it is just an anecdotal piece of writing. But it does, in fact, make a very good, common sense kind of point. It lines up well with what we know about adolescent behavior; it lines up well with what we know about drinking on campus; it lines up well with what we see when we walk around the school... and it is shockingly borne out when we load their stuff in our cars at semester's end. Sadly, loan money, once it's in the account is just like that $20 they got from Grandma at Xmas....it's there to do with as they please. And they do.

Richard, my friend, slow down a bit....take a deep breath. That kind of anger cannot be good for you. I know this is probably hopeless but let me try one last time.

Discussions do not carry footnotes. You probably find that disturbing, possibly even frightening and for that I apologize. But it is the way actual human conversation occurs.

Discussions (not scientific papers) carry any number of assertions, observations, and illustrative anecdotes. They not atypically include metaphors and analogies. Discussions are interchanges of opinions; we use them to share perspectives. If our logic is coherent and consistent and other discussants find it compelling, we might actually in the course of the discussion, convince someone of something. But rarely do general discussions and casual conversations include statistical studies or verifiable experimental results with appropriate source info. I'm sure you would prefer that every human interchange include those things, but they don't.

That does not mean that any given assertion or observation which is used within a discussion is unproven or unprovable. It does not mean that the discussant believes in things that can't be proven or that they look for chocolate marshmallow eggs on Easter Morning (though who doesn't like a chocolate marshmallow egg from the Easter Bunny -- but maybe that's because I'm only 11!) It simply means the discussion is not the place or the time or the form in which scientific proof is or will be assembled, presented and peer-reviewed. This comments column, in other words, is not that place. These comments and the responses, even the rabid ones, are not scientific papers....nor would anyone truly expect them to be.

Reality does not exist unless statistically proven? Human behavior has no consistency? Logic has no place? Personal experience is worthless?

Is it really just impossible for any of us to discuss anything from any perspective until or unless a certifiable validation of every assertion, every observation, every piece of personal testimony has been assembled, re-validated and notarized???

To constantly insist that everyone here with whom you disagree must present their arguments with footnotes, dates and sources is incredibly silly.

Not all students behave so irresponsibly with loan money, but there must be several who do. To prevent misuse of the funds, student loan programs should be used only for tuition and nothing else. Banks and financial institutions should be mandated to hand out the money directly to the college/university/school. No part of the student loan money should ever go directly into the hands of the students - for one, young students are (and should be) too carefree to understand finances, interest rates, and money in general. For living/misc expenses and books, students could do a mix of part time jobs, personal loans or credit cards.

I agree completely - mortgage borrowers do not take the funds directly into their accounts before forwarding them to the seller; otherwise you'd have massive misallocation. Send the money directly to schools, or at least into a limited-use account administered by the schools, with some minor portion allocated to living expenses. Right now student loans are like credit cards.

I know that the loans I had went for tuition, fees, and books. I had to cover everything else with three part time jobs, and living at home. I don't know one person that 'squandered' their loans on frivolities. I am offended every time I hear this same insipid argument. My loans barely covered the basics, much less any thing remotely fun. In fact no one I know of in the two programs I studied used the loans for anything other than school, and school related expenses. Stop assuming all of us are lay a-bouts with nothing to do except how to get out doing the right thing! Many of us are struggling to get through school, and even more so when it comes to paying it back. Don't give me the chutzpah about lazy, entitled, spoiled. the people I know are responsible, struggling Americans losing their foothold in the middle class. By assuming this as being the norm and not the exception, you are doing a great disservice to Student Loan Reform, and casting a pallid shadow on those of us just getting by, while trying to fix the broken system.